Global Crossing Agrees To Be Bought By 2 Asian Firms

3 Months After Rejecting A $750 Million Bid, The Bankrupt Telecom Company Accepted An Offer Of $250 Million

August 10, 2002|By Seth Schiesel, New York Times

Global Crossing and its creditors agreed on Friday to sell control of the company for $250 million to two Asian companies, three months after the creditors rejected a $750 million offer from the same bidders.

After many delays and months of negotiations, Global Crossing, a once-high-flying international telecommunications concern, announced a deal with Hutchison Whampoa of Hong Kong and Singapore Technologies Telemedia, a unit of Singapore's state-run phone company.

Soon after Global Crossing filed for bankruptcy protection in the spring, the Hutchison group offered $750 million in cash for about 79 percent of the company, implying an overall value of about $950 million.

Confident that they could get more for control of Global Crossing, which has assets valued at more than $20 billion, the company's creditors rejected that offer.

At least two other groups, one led by Platinum Equity, a private investment firm, and another led by an investment fund backed by Bank One, submitted bids for Global Crossing.

But over the summer, as other telecommunications carriers like Qwest and WorldCom imploded amid accounting scandals, the bids for Global Crossing have become smaller and smaller.

Under the terms of the deal, Hutchison and Singapore Technologies will end up with 61.5 percent of Global Crossing after the $250 million investment, implying an equity value of only about $407 million, less than half the value associated with the original bid.

"This is a textbook model for a successful strategic investment," he said in a statement. "Hutchison Telecommunications and Singapore Technologies Telemedia are highly respected telecom companies with assets and skills that complement Global Crossing's unmatched global network.

"With our turnaround well under way, and the support of strong new strategic partners, Global Crossing is poised to become the global leader providing networking services to enterprises and carrier customers in more than 200 of the world's top cities."

Before that can happen, however, the company must contend with about 60 shareholder lawsuits and investigations of its accounting by the Justice Department, the Securities and Exchange Commission and Congress.

A bankruptcy judge in New York gave the deal his preliminary approval on Friday, and the company and the winning bidders must develop a formal plan by the middle of next month.

During the telecommunications boom of recent years, Global Crossing amassed more than $12 billion in debt and achieved a peak market value of almost $50 billion as it built a global web of undersea communications lines.

The company's founding executives, led by Gary Winnick, sold hundreds of million of dollars of stock before the company collapsed amid accounting scandals.

Under Friday's deal, the company's public shareholders will receive nothing.

After the deal is completed, the company plans to give a total of $300 million in cash to the banks that originally lent it about $2.6 billion. The banks would also receive new notes worth about $175 million and would own about 6 percent of the company.

The company's other creditors, including bondholders, are to receive 32.5 percent of the company and $25 million in notes.

"Global Crossing presents an attractive business prospect for Hutchison," Canning Fok, Hutchison's group managing director, said in a statement on Friday.

"Our investment in the company, which owns substantial broadband network capacity, is in line with our vision to be a leading global telecommunications player."

The agreement sets the stage for Global Crossing to emerge from bankruptcy early next year, although with new ownership.